Carbon CompassSM
Methodology
Carbon CompassSM
Methodology
Explore our
Carbon CompassSM methodology
Iron & Steel, Cement and Aviation (December 2022)
Oil & Gas, Electric Power and Auto Manufacturing
(May 2021)
Our Paris-aligned financing
commitment
A key aspect of JPMorgan Chase’s environmental sustainability strategy is how we engage with clients that operate in carbon-intensive industries, with the goal of helping accelerate the low-carbon transition and set a path toward global achievement of net-zero emissions by 2050.
We committed in October 2020 to align key sectors of our financing portfolio with what we consider to be the primary goals of the Paris Agreement, which aims to limit the global average temperature rise to well below 2 degrees Celsius, and ideally to 1.5 degrees Celsius, above pre-industrial levels. To meet our commitment we are setting portfolio-level emissions intensity reduction targets in select sectors that are aligned to science-based emissions reduction pathways.
In May 2021, we became the first large U.S. bank to establish 2030 portfolio-level emission reduction targets, which we set for three sectors: Oil & Gas, Electric Power and Auto Manufacturing. We also published our Carbon CompassSM methodology detailing our approach. In December 2022, we expanded Carbon CompassSM with targets for three additional sectors: Iron & Steel, Cement and Aviation.
Over time, we aim to expand this work to address additional carbon-intensive sectors, in alignment with global climate goals and evolving best practices for the financial sector, and to further engage with our clients on their decarbonization journeys. For additional information on our environmental sustainability strategy and how we are supporting our clients, see our most recent firmwide Climate Report.
of Carbon CompassSM
Key choices and considerations in how we have sought to reasonably design our metrics and targets for individual sectors:
To evaluate emissions intensity in each of the included sectors, we compute a portfolio-weighted average of emissions performance for all our clients in the sector portfolio. Weights are determined based on our cumulative financing to each client as a share of our total financing to the sector. We include both financing that we directly provide (such as through revolving credit facilities) as well as our share of facilitated financing (such as through our underwriting in debt and equity capital markets).
Science-based
Our targets build on the transition pathways outlined by credible, third-party emissions reduction scenarios, including the IEA NZE by 2050 Scenario and Sustainable Development Scenario. We also reference a wide range of public resources, including additional climate scenarios, decarbonization research and other frameworks for assessing alignment with global emission reduction goals.
Sector-specifc
Within each sector, we focus on specific activities with material emissions and credible transition pathways, enabling us to gain more useful insight and better support our clients in developing and implementing their strategies.
Decision-useful
For each sector, we define one or more core metrics that capture essential facts about companies’ performance and progress towards decarbonization, and that are compatible with the benchmark trajectories we use to evaluate alignment to global emissions goals.
Best-available data
Each metric is designed to make use of consistent, well-reported and standardized data. Where gaps exist, we define processes for use of appropriate alternatives.
portfolio emissions metric
Carbon CompassSM
Key choices and considerations in how we have sought to reasonably design our metrics and targets for individual sectors:
To evaluate emissions intensity in each of the included sectors, we compute a portfolio-weighted average of emissions performance for all our clients in the sector portfolio. Weights are determined based on our cumulative financing to each client as a share of our total financing to the sector. We include both financing that we directly provide (such as through revolving credit facilities) as well as our share of facilitated financing (such as through our underwriting in debt and equity capital markets).
Science-based
Our targets build on the transition pathways outlined by credible, third-party emissions reduction scenarios, including the IEA NZE by 2050 Scenario and Sustainable Development Scenario. We also reference a wide range of public resources, including additional climate scenarios, decarbonization research and other frameworks for assessing alignment with global emission reduction goals.
Decision-useful
For each sector, we define one or more core metrics that capture essential facts about companies’ performance and progress towards decarbonization, and that are compatible with the benchmark trajectories we use to evaluate alignment to global emissions goals.
Sector-specifc
Within each sector, we focus on specific activities with material emissions and credible transition pathways, enabling us to gain more useful insight and better support our clients in developing and implementing their strategies.
Best-available data
Each metric is designed to make use of consistent, well-reported and standardized data. Where gaps exist, we define processes for use of appropriate alternatives.
How we designed Carbon CompassSM for
each sector
Carbon CompassSM incorporates what we believe are the most relevant, impactful, credible and decision-useful data and metrics to drive progress. The graphic below summarizes the process we follow in crafting a tailored methodology for each sector.
Our 2023 global portfolio
emission
reduction targets
Key aspects of our methodology for each of the included sectors,
as well as our portfolio baselines and 2030 targets:
Iron & Steel
We focus on GHG emissions associated with crude steel production (Scopes 1 and 2). This captures emissions and activity from primary and secondary steelmaking processes, and accounts for approximately 97% of total value chain emissions for the sector. This enables us to account for variations in the emissions profiles of different steelmaking processes, while also concentrating on the full range of decarbonization strategies for the sector, which include electrification, increasing scrap recycling, using lower-carbon energy inputs such as biomass or hydrogen, and deploying carbon capture, use and storage technologies.
Cement
We evaluate GHG emissions (Scopes 1 and 2) from cement manufacturing. This includes both energy-related and process emissions, and accounts for approximately 90% of total lifecycle emissions for the industry. By using cementitious product, we are able to capture both the primary driver of sector emissions (i.e., clinker production) and potential levers for reducing them, including the use of cement and clinker substitutes.
Aviation
Our target focuses on direct (Scope 1) CO2 emissions for revenue-generating passenger service and belly freight operations of airline companies, specifically from combustion of fuels during flight. This allows us to focus on companies’ relative progress in reducing, and ultimately replacing, the use of fossil-based jet fuel — the primary driver of the sector’s climate impact.
Oil & Gas
We have established two distinct metrics and targets for Oil & Gas: Operational intensity for emissions from production and refining activities (Scopes 1 and 2), and End Use intensity to capture emissions from the combustion of oil and natural gas (Scope 3). This approach acknowledges that both Operational and End Use emissions are important to the sector’s climate impact, and that there is a particular need to address operational methane emissions in the near term.